Simpleminded Krugmanism

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You know what else is a product of the past? Solar panel manufacturing in Massachusetts. The state gave Evergreen Solar at least $45 million in subsidies. “Green” technologies got help from the federal government too – in the form of tax breaks. But last week, the company said it was moving its manufacturing business to…China!

And guess what else is a product of the past – Paul Krugman. The New York Times columnist tries to explain the division in US politics as a split between Republicans, who want less government and more liberty, and Democrats, who want more government and more fairness.

Yeah, yeah…

In Krugman’s simpleminded world…it is a struggle between good and evil…smart and dumb…progress and backsliding. He sees the democrats as the good guys. The republicans are bad guys.

Such a simpleton’s world must be a comfort. You don’t really have to do much thinking. Everything is black. Or it is white.

Too bad for Krugman, but most of the world is actually gray. If the republicans were so squarely in favor of limited government and liberty, how come they didn’t actually cut government spending when they had the chance? They ran the show for years. And during those years government spending went up faster than it did under the democrats.

A look back over the last 100 years finds trends that go way beyond republican or democratic administrations. Almost every year, the reach of the federal government expanded. More people were covered by more programs…with more debt and spending obligations pushed farther into the foggy future. Now, according to Prof. Laurence Kotlikoff, the full measure of that unfunded, largely off-the-books, debt is over $200 trillion – making the US government, effectively, insolvent. And that didn’t get there just because of democrats.

Nor will electing a republican make it go away.

And guess what else. If you look at the situation here in France, you see much the same thing. The cultural references are different. The debaters use different words and different concepts. There are no republicans…no democrats. And yet…except for the fact that France no longer has imperial aspirations…the situation is much the same. The government has promised everything to everybody.

Look…according to our new Daily Reckoning theme…political parties, voting, the blah, blah of partisan debates…as well as Paul Krugman…

…they are all almost irrelevant…all “products of the past”…

…relics…emblems…icons…symbols…

…full of sound and fury, but signifying nothing.

The real trends are bigger than that. What is at stake here is a model of government that began with Otto von Bismarck. It is a model in which the state supposedly serves the interests of the citizens. (Under the previous model, there were no citizens…just subjects who owed a duty of obedience to the sovereign…and in exchange received protection.) In Bismarck’s model, citizens give up a portion of their output…and stand ready to protect the state with their lives. In return, the state gives them the right to participate (through elections etc)…provides protection from foreign states and domestic outlaws…and makes sure that their physical needs are taken care of.

This model seems to be headed for bankruptcy. The big question is: when the state is unable to provide the benefits it has promised…what will happen? Will the masses accept less? Or will they revolt? Or will a new model evolve…peacefully?

Stay tuned.

Reprinted with permission from The Daily Reckoning.

Bill Bonner is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and The New Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007). Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning.

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